Widow Poverty and Out of Pocket Medical Expenditures in the Last Years of Life

Robert Schoeni, University of Michigan
Kathleen McGarry, University of California at Los Angeles

The aging of the population is putting financial pressure on government transfer programs. At the same time, the Medicare program has been criticized for providing inadequate benefits such as prescription drugs or long-term care. In this paper we study out of pocket medical expenditures (OOPME) for prescription drugs, long-term care, and other health services in the last years of life. This focus allows us to examine the consequences of OOPME on the financial well-being of the surviving spouse. Using the Asset and Health Dynamics Study, we find that OOPME in the last 2 years of life are substantial, totaling $11,000 on average. For lower income families, OOPME are large relative to income. Furthermore, we find that OOPME in the last years of life can partially explain why poverty is so pervasive among widows; widows had to spend a substantial share of their wealth on health care of their dying spouse.